By: Gustavo Diaz Business Process Engineering & Lean Tools in a Transactional (Service) Environment

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1 By: Gustavo Diaz Business Process Engineering & Lean Tools in a Transactional (Service) Environment Introduction Even though the use of the Six Sigma Methodology in a manufacturing environment has been well established for the last thirty years; the use of Six Sigma in the transactional or service industry came later on circa mid nineteen nineties. Its deployment was doubtful at first, and it took another ten to fifteen years for Six Sigma to be recognized as a very viable improvement and optimization methodology in the high volume transactional service areas. As Six Sigma, Lean was articulated to support manufacturing environments; in particular successfully used by Toyota, as the Toyota Production System (TPS), and later known as Lean Manufacturing. With the success of Lean Manufacturing in the manufacturing environments, it was a matter of time for scholars and practitioners to migrate and integrate tools and methods from Lean into the "traditional" Six Sigma DMAIC. Lean Six Sigma came into the business process improvements arena in the early to mid nineties. Some natural questioning and reasonable skepticism has taken place since then. Lean Six Sigma is going to the same growing pains and recognition as a set of tools that supports and furthers an analyst tool box to improve his (her) ability to improve non-manufacturing or transactional business processes. Lean Six Sigma is better defines as an extension and adoption of tool into the traditional Six Sigma DMAIC methodology. What is Lean or Lean Six Sigma? Lean Manufacturing is a series of practices that systematically attacks and reduces waste; targets cost reduction and proposes operator empowerment. The waste term would represent non-value added activities, delays in the production cycle, rework, unnecessary inspections, and non-optimized inventory levels of raw materials, product in process or finished product. Lean equates to streamline and use "less". Typical tools to achieve these reductions and improvements are: Value Stream Mapping (VSM), Muda (Waste reduction), 5S (Sort, Set in Order, Shine, Standardize, and Sustain) organization tools, Kaizen blitz

2 or kaizen teams, Theory of Constraints (TOC), TAKT time, Continuous Flow Manufacturing (CFM), Kanban methods, continuous improvement, among others. Lean Six Sigma has mainly being adopted by the DMAIC methodology of Six Sigma. However, some integration work has also been done in the Design for Six Sigma (DFSS) methodology. The Metaspire Approach For the past five years Metaspire has been leveraging Lean concepts within the Business Process Management (BPM) framework. Lean tools are use in the analysis and design of processes, values, organizational priorities. Metaspire has also leveraged the Six Sigma tools available in Metastorm ProVision such as process maps, capability models and scorecards, to mention a few of the Provision constructs. When using BPM tools such as a Business Interaction Model, a capability model, a process model or a requirement model, Metaspire practitioners, where appropriate, would also leverage tools like Quality Deployment Function (House of Quality), Failure and Mode Effect Analysis (FMEA), or an Ishikawa exercise (all Six Sigma tools) to gather prioritized customer needs and wants, potential causes for failure modes and input them into Goal, Opportunity or Problem models, or Organization models. The advantage of this combined approach is to help the customer (client) to quantify levels of defects and opportunities, measure the capability of their processes, as well as visualize where these defects are occurring in their processes and operations. By the same token, Lean Six Sigma benefits from the different and powerful tools in Provision like its process modeling tools, organization modeler, opportunity modeler and strong simulation capabilities (in particular the ProVision tool completely lacks from the Six Sigma artifacts - leaving the modeler/ analyst to look for alternatives). Use and Benefits of Lean The use of Lean Six Sigma in a transactional environment helps increasing the following aspect of a business process: Increase customer loyalty and customer spend. Decrease levels of defects lowering the transaction costs Increase of transactional speed (rates) and volumes. Streamline of processes. Organizational productivity. Process capability and flexibility. How to Apply the Lean Tools? The best way to present the use of Lean Six Sigma is to use the metaphor of a tool box. The more tools and the more different sizes of a tool, the easier a job is completed. The Lean tools that have been adopted in the DMAIC framework have enhanced the abilities and the skills of Metaspire consultants, analysts and organizational developers. The following graph depicts the places where the Lean tools are most likely to be effectively used.

3 Define Measure Analyze Improve Control Project Charter Value Stream Maps Takt Time Kaizen Blitz (low hanging fruits) Muda Bottlenecks Lead Time Takt Time 5 S methods Kaizen Pull / Kanban Safety Kaizen teams

4 Lean Tool Definition Uses of Lean Tools in a Transactional Environment 5S (Area organization) Bottleneck (Constraint) Kaizen Blitz Kanban Lead Time Muda The 5 S s actually stand for Japanese terms, which loosely translate as Sort, Set in Order, Shine, Standardize, and Sustain. A place for everything. Everything in its place. Clean. Shadow boards. Labels. Transparent containers. Clear posted instructions. Color codes. All appropriate tools where needed and fit for use. Remove the un-needed. Place infrequently used items out of the way. The machine or function that limits the output of the entire factory. The idea is to focus all efforts on improving the output of the bottleneck by eliminating the restrictions that have created that bottleneck. A concentrated improvement initiative typically focused on one shop or office area. Generally involves 2-5 days. The intention is to make something happen now, i.e. to attain significant tangible results by the end of the project. Blitzes are a powerful way to get something done in a particular area. A signal to move or make an item in a production process. The simple rule is that no item is to be produced or moved unless there is a kanban authorizing it. A Kanban can be anything: A light, a card, etc, it most frequently takes the form of a physical space or container: e.g. squares taped out on a table, lines painted on the floor, marked tote bins, carts, racks, etc. There is typically a direct relationship between the amount of Work in Process inventory and the actual lead time required to get a product through your manufacturing process. In most traditional plants, the lead time to get a product through the operations is considerably longer than the actual Value Add time, creating unnecessary inventories and longer time to make the product available to the customer Anything that does not add value, from the customer s and only the customer's perspective. Ask the questions: Would the customer pay extra for us to do this? Would the customer care if we eliminated this activity? Constantly push to minimize / eliminate all non-value adding activities from 5S are applicable in organizing work areas, such us call agent workstations, LAN rooms, computer desktops, mail rooms, When looking at business map processes (transactional environments), bottleneck determination is important when trying to determine ways to improve cycle time. Bottlenecks are also part of resource balancing in process workflows represented in swim lane process maps or value stream maps. Kaizen blitz is used in transactional or manufacturing processes when we try to execute and implement solutions for low hanging fruits. It does require process champion sponsorship due to the intensity of the process resources in a short period of time. N/A N/A Muda is applicable in any business process, since process optimization includes the elimination of non-value added process steps or product and service features.

5 Lean Tool Definition Uses of Lean Tools in a Transactional Environment Takt Time Value Stream Mapping the entire value stream. Note that there is likely going to be certain activities that still must be done that do not add value. This concept is based on the idea of leveling production for efficient use of your resources. The sales requirement is divided by the planned work hours to arrive at the required rate of production to meet the customer demands for the product. The entire chain of participants, from basic raw material to the final customer. It involves suppliers, customers, wholesalers / distributors, retailers, and transportation steps. Since the ultimate consumer price is a function of the cumulative costs of the entire value stream, streamlining this supply chain becomes critical. In a more narrow definition, value stream is also used to denote the entire stream of activities required to move a product through the internal processes / activities within the enterprise. Takt time is a useful metric to compare with the process cycle time, as it helps us to determine lead time or early finishes for processes. Value Stream maps are interchangeable with the more traditional swim lanes. If the level of complexity calls for clear identification of moves, delays, storages and rework loops, then the Value Stream map is likely a better tool than the traditional swim lane maps.

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